There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I've selected some of the most undervalued companies of S&P 500. The ModernGraham model is based on the full teachings of Benjamin Graham. All of these companies are suitable for the Defensive Investor and the Enterprising Investor.
Defensive Investors are defined as investors who need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.
Newell Brands Inc. (NWL, Financial)
Newell Brands Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.28 in 2014 to an estimated $2.89 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.48% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Newell Brands Inc revealed the company was trading below its Graham Number of $41.25. The company pays a dividend of 88 cents per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share) was 9.46, which was below the industry average of 20.37, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.44.
Prudential Financial Inc. (PRU, Financial)
Prudential Financial Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.17 in 2014 to an estimated $12.54 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.45% annual earnings loss over the next seven to 10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Prudential Financial Inc revealed the company was trading below its Graham Number of $185.87. The company pays a dividend of $3 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share) was 7.6, which was below the industry average of 30.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry.Â
Unum Group qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.31 in 2014 to an estimated $4.21 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.44% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Unum Group revealed the company was trading below its Graham Number of $69.92. The company pays a dividend of 86 cents per share, for a yield of 1.8% Its PEmg (price over earnings per share) was 11.39, which was below the industry average of 22.6, which by some methods of valuation makes it one of the most undervalued stocks in its industry.Â
Lincoln National Corp. (LNC, Financial)
Lincoln National Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.25 in 2014 to an estimated $7.21 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.03% annual earnings growth over the next 10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Lincoln National Corporation revealed the company was trading below its Graham Number of $121.79. The company pays a dividend of 87 cents per share, for a yield of 1.1% Its PEmg (price over earnings per share) was 10.56, which was below the industry average of 20.16, which by some methods of valuation makes it one of the most undervalued stocks in its industry.
Invesco Ltd. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.89 in 2014 to an estimated $2.63 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.87% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Invesco Ltd. revealed the company was trading below its Graham Number of $38.60. The company pays a dividend of $1.15 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share) was 12.24, which was below the industry average of 21.55, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.2.Â
Disclaimer:
The author held a long position in Invesco (IVZ, Financial) but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions. ModernGraham is not affiliated with the company in any manner.Â
